As fascinating as cryptocurrencies are, they are not necessarily perfect. So depending on the types of an upgrade, the nodes may need to undergo the updates to remain within the same blockchain. If the upgrade is backward-compatible, meaning that a node may not need to update the blockchain to remain within it, this is known as a soft fork. A hard fork is completely different and rather more complicated.
Ethereum has been through various forks throughout its history, including the most recent forks Ethereum Berlin hard fork and the upcoming Ethereum London hard fork on the Every blockchain protocol has a mainnet. This is a component of the blockchain where the transactions of a cryptocurre.... This begs the question: How sustainable is the Ethereum network going to be? How will it impact the network transaction fee that is prone to congestion on the network? Ultimately, is this upgrade doom for all “Ethereum Killers?”
In this article, we’re getting down into the nitty-gritty to find out the rationale behind the Ethereum London hard fork and to highlight some of its features.
What Is a Hard Fork?
Upgrades that aren’t backward-compatible in a cryptocurrency network are known as hard forks. If a node doesn’t upgrade its blockchain, it may no longer be a part of the network. There are several implications to the introduction of hard forks. Because soft forks are backward-compatible, a node can choose to remain in the network without the new features, even if the node isn’t satisfied with the new updates. The same cannot be said about hard forks.
Another implication of hard forks comes into play if a rather considerable portion of the network is not satisfied with the new updates. Nodes may choose to remain in the non-updated, original blockchain, while the ones that update stay in the updated one. This separation may cause the creation of a new cryptocurrency. This was the case with Ethereum Classic.
For instance, Ethereum Classic created due to the DAO attacks in 2016. Around $50 million was stolen from a DApp in the network. To keep this from happening again, Ethereum created a hard fork that involved various changes, including a future transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). A portion of the total nodes in the network at that time did not want to undergo such changes remained in the original Ethereum blockchain, now known as Ethereum Classic.
But this has not been the only hard fork that Ethereum has had. For example, the most recent Ethereum hard fork includes the Berlin hard fork in April 2021. The next hard fork which will occur in the Ethereum network is the long-awaited London fork. All of these forks are planned to be the stepping-stone for the major upgrade of Ethereum, Ethereum 2.0 (also known as Serenity).
How Will Ethereum 2.0 Hard Fork Carried Out?
Ethereum 2.0 is the biggest update that Ethereum may undergo in its lifespan to date. This update has three main phases.
Phase 0: It was implemented in December 2020 and introduced the Beacon Chain. The Beacon Chain was the first step into transitioning from PoW to PoS. The main reason for this update is that PoS has proven to be more efficient than PoW in terms of energy usage. This, in turn, has repercussions for the environment because a PoW cryptocurrency is more likely to waste energy and leave carbon footprints.
Phase 1: Ethereum plans to integrate shards into the Ethereum network and connect them with the Beacon Chain. Such shards can increase the performance rate in the Ethereum network.
Phase 2: It involves the full utilization of the shards and makes the current Ethereum blockchain one of the shards of Serenity.
Ethereum Berlin Hard Fork Highlights
As mentioned, such updates need to happen gradually because drastic changes may result in negative outcomes. Because of this, forks such as the Berlin hard fork were rolled out first.
The Berlin hard fork occurred with Block 12,244,000 and involved the EIP-2565, EIP-2718, EIP-2929, and EIP-2930 updates.
It involved gas fee reduction in the Ethereum network. This was relatively beneficial for users as they needed to pay less in ETH for running services on the Ethereum network. This is done through a function known as modular exponentiation, or simply ModExp.
EIP-2718 involved a new function known as the typed transaction envelope. With this function, Ethereum transactions are backward-compatible. This completely changes the approach to transactions in Ethereum, as they may become much easier to add through the use of “envelopes.”
This was a proposal that involved the increase of gas prices in Opcodes. In the past, since such gas fees were cheap, there have been attempts for denial-of-service (DoS) attacks using Opcodes. To lessen this possibility, Vitalik Buterin increased gas fees considerably. Note that this happened before the Berlin hard fork.
The EIP-2930 Protocol
Lastly, this update involved a new type of transaction, which includes a specific list of addresses. The addresses in this access list can trade using much smaller gas fees. If a user wants to trade with someone outside the access list, the gas fees are a little higher.
Now that we know a little about the Berlin hard fork, let’s look at the London hard fork, and how these two might be connected for the future of Ethereum and Serenity.
Ethereum London Hard Fork
The Ethereum London hard fork rollout is scheduled for its deployment on the Goerli testnet on June 30. Following that, it will be launched on the Rinkeby testnet on July 7, and to fully deploy EIP-1559 on Ethereum mainnet at the end of July.
The update supposes to address some of the controversies within the crypto communities. Not everyone supports the features planned for this update. However, if the developers see that a big part of the community is not going through with the update, they can return the old features with the next phases of Ethereum 2.0. So perhaps these changes may not be permanent after all.
The Ethereum’s London Update
The Ethereum London hard fork is going to bring several new features, including two EIPs which we’ll cover in the next section. Basically, the whole purpose of the London hard fork is to prepare users for the adoption of the Ethereum transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) when Serenity or Ethereum 2.0 comes.
Ethereum’s Transaction Fee System Alteration
Instead of selecting the fees yourself to determine the speed of your transaction, the Ethereum network will set transaction fees with a base fee for each block rather than bidding on gas prices. This naturally translates that transaction speed will also be equivalent for all users. However, there is still an option for you to tip the responsible nodes for securing the network.
But, there is a small flaw with this new method, namely a potential slippage in the gas fees. You may advance with a transaction at a fixed gas fee, but by the time the transaction is finished, the gas fee may have increased. This could lead to unwanted losses when conducting transactions. But there’s also a solution: You can simply set a fee cap, and decide on the maximum amount of gas fees that you’re willing to pay. This prevents the possibility of paying unwanted gas fees.
Currently, Ethereum has inflationary properties because of its unlimited and relatively large supply. That’s going to change with the London hard fork, as Ethereum is going to be more deflationary.
Although the transition to PoS from PoW might be a win for efficiency and the environment, some may still not be on board. For example, miners who have invested in powerful processing mining rigs (i.e., ASIC miners) might argue that their investment may go to waste. Moreover, they might also assert that PoW is more profitable than PoS, even though it requires more energy.
Ethereum Network Upgrades and EIPs
EIP is an abbreviation for Ethereum Improvement Proposals. EIPs are considered to be the biggest changes in a hard fork in the Ethereum network. The Ethereum London hard fork has two EIPs planned. These are EIP-1559 and EIP-3238, according to the Ethereum Core Devs Meeting #107.
The first proposal is the EIP-1559, which is also known as the Fee Market Change for ETH 1.0 Chain. This proposal is perhaps the biggest change because it involves transaction fees. EIP-1559 plans to set a fixed fee for everyone, so you may no longer be able to decide how quickly your transaction is conducted. The fee that is used for each transaction gets burned, so ETH from the total supply is reduced. This new burning mechanism is likely to make Ethereum more deflationary, which could play a big role in the future price of ETH.
This fixed transaction fee changes, and will be based on congestion levels in the blocks of transactions. The threshold for the fee change is 50%, so if a block is filled with more than that level of transactions, the fixed fee is increased. If the level is lower than 50%, the fixed fee is decreased.
The other proposal is EIP-3238 — portentously known as the Ethereum Difficulty Bomb Delay. This update is going to make mining Ethereum much more difficult than it currently is. As this proposal’s name suggests, mining times will be longer, making PoW mining in Ethereum much more expensive while transactions get slower. You may wonder why the developers are doing this. The answer is simple: push people to transition to PoS.
It is clear that the developers do not want the Ethereum 2.0 update to cause the creation of other blockchains as a result of the hard fork. The logic is as follows: if they make it very difficult for miners to mine, they’ll have to shift to PoS.
The Future Ethereum Hard Forks
After the Ethereum London hard fork, there are still more ethereum improvement proposals to make Ethereum 2.0 more achievable. The next hard fork is the Ethereum Shanghai hard fork, planned to occur sometime during the last quarter of 2021. It’s anticipated that this fork may bring Ethereum 1.0 and 2.0 together to make the final implementations much smoother. However, this fork is still speculative, and its prospective features are still uncertain at this time. After the Shanghai hard fork, there might be yet another fork before the final phases of Serenity.
The Bottom Line
To sum up, the Ethereum London hard fork is one of the most anticipated hard forks in the Ethereum network as developers take another step into the Ethereum 2.0 update and foster a better ethereum community. While some might not be satisfied with the deviation of Ethereum mining, some are rather excited about the impact it gives to the rise of decentralized finance.
Whatever these new rules bring may produce outcomes crucial to both the network and the community. Only time will tell regarding the future of Ethereum after this fork. Nonetheless, it is an update integral to Ethereum’s improvement.